The three discoveries that revolutionized the South American oil sector

After Exxon's string of high-quality oil discoveries offshore Guyana provided more than 11 billion barrels of oil resources, South America began to attract significant attention from energy investors. South America has become the new continent of choice for big oil companies. Although analysts describe Guyana as the most exciting frontier oil field in the world, it is not the only South American country attracting interest from global energy companies. Argentina is experiencing a massive boom in unconventional oil and gas, which sees the crisis-hit country regularly post new production records. And then there's Brazil, which is projected to become the world's fourth largest oil producer by the end of the decade. South America is attracting the attention of big oil companies and three countries stand out as the hottest drilling spots on the continent.

Third place: Argentina

Argentina is once again embroiled in an economic crisis in which rampant inflation is eroding the wealth of ordinary Argentines and destabilizing the economy. While yet another sovereign debt default was narrowly avoided, South America's second largest economy is experiencing a period of severe turbulence. In April 2023, the country's inflation rate exceeded all forecasts, reaching an annual high of 109%. This is having a strong impact on consumers, who are facing further difficulties due to the overheating of the economic crisis and the worsening drought in Argentina. Indeed, Argentina is teetering on the brink of a deep economic crisis and there is no sign that the sustained, economically damaging drought is ending anytime soon.

The national government in Buenos Aires has viewed the vast 3 million-hectare Vaca Muerta shale formation in the Neuquén Basin as a silver bullet to Argentina's severe economic and fiscal woes for more than a decade . In just two years, Argentina's oil production has grown a staggering 25% to 627,730 bpd in April 2023, down just 0.5% from its production record of 631,103 bpd. day recorded in March 2023. Natural gas production is also on the rise. Argentina pumped 4.4 billion cubic feet per day in April 2023, down 3% from the previous month and 12% from the all-time high of nearly 5 billion cubic feet per day reached in August 2022.

It is the rapid growth of shale oil and gas production from Vaca Muerta that is driving this rush. Shale oil now accounts for 48% of Argentina's oil production up from 41% a year ago, while shale gas is responsible for 57% of total natural gas production up from 53% a year earlier. Analysts believe that Vaca Muerta alone could pump a million barrels of oil by the end of 2030, even as a lack of infrastructure, especially pipeline offtake capacity, is hampering efforts to significantly ramp up production. .

Activity in Argentina's oil sector, and particularly in Vaca Muerta, is ramping up at a frantic pace. According to Baker Hughes' International Rig Count, there were 58 active rigs in Argentina at the end of April 2023, up from 54 a year earlier and 33 in the same period of 2021. Investment in Argentina's oil sector is picking up at a brisk pace. For 2023, state oil company YPF plans to invest $5 billion, a notable 22 percent increase over the previous year. In April 2023, the CEO of the national oil company announced that, in collaboration with some partners, YPF aims to develop infrastructure worth 6-7 billion dollars in Vaca Muerta to boost hydrocarbon exports from the formation. These plans, however, could be disrupted by inflation and the worsening economic crisis in Argentina.

Second position: Suriname

It wasn't long ago that Suriname was considered the most promising frontier oil field after neighboring Guyana, with which the former Dutch colony shares the Guyana Suriname Basin. By 2022, 50/50 partners TotalEnergies, which is the operator, and Apache had made five commercial oil discoveries in deepwater Block 58. The block is believed to hold 5 to 6.5 billion barrels of exploitable oil resources, making it potentially as high-quality an asset as Guyana's prolific offshore Stabroek block.

TotalEnergies and Apache were originally expected to make a final investment decision, known as the FID, during 2022 and the first oil from the block was expected in 2025. The FID, however, was delayed due to a discrepancy between the seismic data, drilling results, and the high oil/gas ratio impacting the commerciality of the block's oil exploitation. This delay was understandable considering Suriname's economic crisis and that it will take up to $10 billion to develop Block 58 and bring the resource to prime oil.
While this has raised considerable concern in Paramaribo and among energy sector investors, there are indications that the situation may not be as dire as originally thought. Positive results from evaluation drilling and flow tests, which see TotalEnergies having identified at least 500 million barrels of oil resources, have meant that Block 58 has been put to good use.

Suriname's burgeoning oil boom affects not only offshore Block 58, but also Block 53, operated by Apache in partnership with Malaysian national oil company Petronas, and Block 52, operated by Petronas with partner Exxon. TotalEnergies, Chevron, Shell and QatarEnergy have taken part in a series of shallow water blocks being auctioned by Suriname's national oil company and industry regulator Staatsolie in 2021. The development of Suriname's offshore oil resources will offer a huge economic gain to a country facing a profound economic catastrophe.

First position: Guyana

After a series of oil discoveries by Exxon in the prolific offshore block of Stabroek, the impoverished South American country Guyana has emerged as the last drilling area in Latin America and the Caribbean. Industry analysts describe the former British colony as the hottest frontier drilling site in the world. There are signs that the feverish activity going on offshore Guyana will pick up pace as foreign energy companies grab the loot. Georgetown's efforts to boost oil revenues by introducing a tougher production-sharing agreement, with a 10% royalty rate, a lower cost-recovery threshold, and a 10% corporate tax, also did little to discourage interest in offshore Guyana.

The impoverished South American microstate went from first world-class discovery in 2015 to first oil in 2019, a four-year period that represents a staggering pace of development for a major billion-dollar energy project. By April 2023, Guyana was pumping nearly 400,000 barrels of crude oil per day, well above the nominal capacity of the two FPSOs operating at the Liza field. By implementing additional efficiencies and FPSO improvements, Exxon will be able to further increase production. Guyana is expected to pump at least 1.2 million barrels a day by 2027. Oil production in the former British colony could increase even more than expected, because Exxon made two more oil discoveries already in the course of the year. 2023 and intends to bring two deals online by the end of 2025. Last month the energy supermajority greenlit the $12.7 billion Uaru oil project.

Offshore Guyana is not just about the prolific Stabroek block. The country is attracting significant interest from foreign energy companies as more oil discoveries are made. The latest is CGX Energy's discovery of the Wei-1 wildcat well in the Corentyne block. According to the company, which is 78% owned by Canadian intermediate oil producer Frontera Energy and also holds a 68% stake in the block, the well has encountered several oil ranges. However, according to CGX, it is not certain that the hydrocarbons found are sufficient to sustain a commercial development. This indicates that the Stabroek Block oil route continues through the northern tip of Corentyne to Block 58 off Suriname.

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The article The three discoveries that revolutionized the South American oil sector comes from Scenari Economici .

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This is a machine translation of a post published on Scenari Economici at the URL https://scenarieconomici.it/le-tre-scoperte-che-hanno-rivoluzionato-il-settore-petrolifero-sud-americano/ on Wed, 07 Jun 2023 07:00:29 +0000.